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Shares of EPAM Systems (EPAM) have been strong performers lately, with the stock up 20.1% over the past month. The stock hit a new 52-week high of $314.32 in the previous session. EPAM Systems has gained 47.2% since the start of the year compared to the 21% move for the Zacks Computer and Technology sector and the 19.1% return for the Zacks Computers - IT Services industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 6, 2020, Epam reported EPS of $1.46 versus consensus estimate of $1.2 while it beat the consensus revenue estimate by 5.78%.
For the current fiscal year, Epam is expected to post earnings of $5.81 per share on $2.6 billion in revenues. This represents a -0.07% change in EPS on a 13.32% change in revenues. For the next fiscal year, the company is expected to earn $7.1 per share on $3.15 billion in revenues. This represents a year-over-year change of 21.06% and 21.2%, respectively.
Epam may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Epam has a Value Score of D. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 53.8X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 52.2X versus its peer group's average of 13.3X. Additionally, the stock has a PEG ratio of 3.45. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Epam currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Epam passes the test. Thus, it seems as though Epam shares could have potential in the weeks and months to come.
How Does Epam Stack Up to the Competition?
Shares of Epam have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including CGI Group (GIB), ManTech International (MANT), and PayPal Holdings (PYPL), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Epam. Still, the fundamentals for Epam are promising, and it still has potential despite being at a 52-week high.
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EPAM Systems, Inc. (EPAM) : Free Stock Analysis Report
ManTech International Corporation (MANT) : Free Stock Analysis Report
CGI Group, Inc. (GIB) : Free Stock Analysis Report
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
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